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USIS Washington File

17 March 2000

Text: USTR Barshefsky Mar. 16 Speech on U.S.-China Trade Relations

(Presses case for Congress to grant China permanent NTR)  (3760)
Quoting a Republican president from the early 1900s on China, who said
the United States must recognize its duties as it demands its rights,
U.S. Trade Representative Charlene Barshefsky continued her quest
March 16 to build support for granting permanent Normal Trade
Relations (NTR) status to China.
In a speech before the Economic Club of Washington on American trade
policy and China's accession to the World Trade Organization (WTO),
USTR Barshefsky pressed the case for Congress to grant China permanent
NTR status so the United States can gain the benefits of that
country's accession to the WTO.
Barshefsky acknowledged the division in the United States over the
issue. "Many ask why we should proceed with a trade agreement -- even
an entirely one-sided trade agreement -- while our differences over
human rights, security issues and other topics remain," she said.
Given the gravity of the U.S.-China relationship, Barshefsky said, "it
is fair, in fact necessary, to judge the WTO accession in their
light."
She urged the economists and policy makers "to judge the WTO accession
in light of its implications for reform in China and Pacific
security."
When one looked beyond precise commitments China has made to their
"deeper meaning," Barshefsky said, "we see that these American goals
would be fundamentally threatened" by a retreat from the trade
agreement.
"As (President) Theodore Roosevelt said of his Open Door Policy to
China in the first years of the 20th century," Barshefsky said, "'We
must insist firmly on our rights; and China must beware of persisting
in a course of conduct to which we cannot honorably submit. But we in
our turn must recognize our duties exactly as we insist upon our
rights.'"
In the same spirit, Barshefsky said, "we also recognize how important
a stable and peaceful relationship with China is -- for the Chinese,
for the world, and for America."
Immediately on accession to the WTO, Barshefsky said, "China will
begin opening its market in virtually every sector. The phase-in of
further concessions will be limited to five years in almost all cases,
and in many cases one to three."
However, for the United States to benefit from China's market opening,
it will have to give China permanent NTR status, the same status the
United States gives to its other WTO trading partners.
Both the Senate and the House of Representatives will have to vote on
the issue which involves ending the application of Title IV of the
Trade Act of 1974 (the Jackson-Vanik amendment) to China.
"The legislative grant of permanent NTR is critical," Barshefsky told
her audience.
"All WTO members, including ourselves, pledge to give one another
permanent NTR to enjoy the full benefits available in one another's
markets. If Congress were to refuse to grant permanent NTR, our
competitors will reap these benefits," she said, but Americans would
not.
Following is the text:
(begin text)
American Trade Policy and China's WTO Accession
Ambassador Charlene Barshefsky
U.S. Trade Representative
Prepared for Delivery
Economic Club of Washington
Washington, DC
March 16, 2000
Good morning, and thank you very much.
Let me in particular express my very sincere thanks to Senator
Mitchell for bringing us together today. As Senate Majority Leader, as
an advocate for the people of Maine, and more recently as one of
America's leading contemporary statesmen, Senator Mitchell has built a
remarkable and admirable record that stretches from environmental
policy, to peace in Northern Ireland, and to trade policy. It is a
record of principle, effective advocacy and patriotic public service.
And it is thus my great privilege to be here at his invitation today
to discuss one of America's most important trade and foreign policy
goals, in China's WTO accession and permanent Normal Trade Relations.
ONE-WAY CONCESSIONS
In the most basic sense, when we consider China's WTO accession and
permanent Normal Trade Relations, we are facing a clear choice.
Last November, after years of negotiation, we reached a bilateral
agreement with China on WTO accession. It secures broad-ranging,
comprehensive, one-way concessions on China's part, opening China's
markets across the spectrum of services, industrial goods and
agriculture. This agreement also strengthens our guarantees of fair
trade, and gives us far greater ability to enforce Chinese trade
commitments. By contrast, under the bill President Clinton sent to
Congress last week, we agree only to maintain the market access
policies we already apply to China, and have for over twenty years, by
making China's current Normal Trade Relations status permanent.
That is the only policy issue now before Congress. China will enter
the WTO. It will retain its current market access in America
regardless of our debate. The only question now is whether we will
choose to accept the benefits of the agreement we negotiated.
DEEPER ISSUES
One might end a discussion of the WTO accession right there. From a
purely trade policy perspective, it would not be wrong to do so; but
we must also think about the wider implications.
China is the world's largest country, and over the past decade the
world's fastest-growing major economy. The future course of our
relationship will have great bearing on American security and strategy
in the 21st strategy; and our relationship with China today, as we all
know, is free neither of deep-seated policy disagreements nor moments
of tension.
These disagreements and points of tension often dominate the China
debate. Many ask why we should proceed with a trade agreement -- even
an entirely one-sided trade agreement -- while our differences over
human rights, security issues and other topics remain. And given the
gravity of our relationship, it is fair -- in fact necessary -- to
judge the WTO accession in their light. And we can begin by tracing
back to its origins the institution China now seeks to join.
AMERICA AND THE TRADING SYSTEM
Today's World Trade Organization has its roots in the General
Agreement on Trade and Tariffs, or GATT. And its creation in 1948
reflected the lessons President Truman and his Allied counterparts
drew from personal experience in Depression and war.
One of the failures they had seen in the 1930s was the inability of
global leaders to resist a cycle of protection and retaliation,
including the Smoot-Hawley Act in the United States and colonial
preference schemes in Europe, which had deepened the Depression and
contributed to the political upheavals of the era. Eighteen years
later, they believed that by reopening world markets they could
restore economic health and raise living standards; and that, in
tandem with a strong and confident security policy, as open markets
gave nations greater stakes in stability and prosperity beyond their
borders, a fragile peace would strengthen.
Thus the GATT was one in a series of related policies and institutions
that have served us well for nearly six decades: collective security,
reflected by the United Nations, NATO and our Pacific alliances;
commitment to human rights, embodied by the Universal Declaration on
Human Rights and then a series of more recent Conventions; economic
stability and open markets, with the IMF and World Bank on the one
hand, and the GATT on the other.
Stepping back for a moment, half a century of experience fully
vindicates the commitment to open markets we made fifty years ago.
Since the 1950s, global trade has grown fifteen-fold. World economic
production has grown six-fold, and per capita income nearly tripled.
And social progress reflects these trends: since the 1950s, world life
expectancy has grown by twenty years, infant mortality has dropped by
two-thirds, and famine receded from all but the most remote or
misgoverned corners of the world. And as Truman and his colleagues
predicted, in tandem with a strong and confident security policy and
growing respect for human rights, the world has become substantially
more prosperous, stable and peaceful.
Senator Mitchell summed this up in his remarks on the Senate floor as
the Uruguay Round Agreements Act passed in 1994:
"The economic miracle of the postwar world is that with the expansion
of international trade, every participating nation's economy has
grown. Human well-being has reached more people at higher levels than
ever before in our history. The leading beneficiary of that trend has
been the United States."
Our Asia policies today fully reflect the fundamental principles of
postwar American strategy:
Our military presence in the Pacific, and alliances with Japan, South
Korea, Thailand, the Philippines, Australia and New Zealand, remain
the strongest guarantees of a peaceful and stable region.
Our advocacy of human rights, over the years, has helped reformers
bring democracy to South Korea, Taiwan, Thailand, the Philippines and
perhaps now Indonesia.
Our support for IMF recovery programs in Southeast Asia, South Korea
and Russia during the financial crisis, and our own commitment to an
open market policy, helped guarantee these countries the resources and
access to foreign markets necessary for rapid recovery, reducing the
international tensions that can accompany economic suffering.
And our Asian trade policy - since 1992, we have created a regional
framework for open trade through APEC; concluded nearly 300 specific
market-opening agreements worldwide and almost 100 in Asia, including
38 with Japan, 13 with South Korea; 20 with the ASEAN states; and 17
with China; and moved toward normalized economic relations with
Vietnam, Laos and Cambodia - is helping to build a more open region
with greater prospects for sustainable growth in the years ahead.
CHINA FROM REVOLUTION TO REFORM
China, of course, took a very different road after the war.
As President Truman and his colleagues took the first steps toward the
postwar miracle Senator Mitchell described, China shut the doors it
had once tentatively opened to the world. Among its new leaders' first
steps after the revolution in 1949 were to expel foreign businesses
from China, and to bar direct economic contact between Chinese private
citizens and the outside world. Inside China were similar policies -
destruction of private internal trading networks linking Chinese
cities and villages, abolition of private property and land ownership,
and of course suppression of any right to object to these policies.
And all this had international effects as well: Asia's largest nation
had little stake in prosperity and stability -- in fact, saw advantage
in warfare and revolution -- beyond its borders.
In essence, the commitment of our postwar leaders to collective
security, open markets and human rights made up a coherent vision of a
peaceful and open world. And China's rejection of these concepts in
the Maoist era made up an equally coherent and consistent policy. Its
economic isolation in the 1950s and 1960s can be separated neither
from its diminishing space for individual life and freedom at home,
nor its revolutionary role in the Pacific region.
China's domestic reforms since the 1970s have helped undo this
isolation, integrating China into the Pacific regional economy as they
opened opportunities for Chinese at home. And American trade policy
over 30 years -- from the lifting of the trade embargo in 1972, to our
Commercial Agreement and grant of Normal Trade Relations in 1979, to
the more recent agreements on market access, intellectual property,
textiles and agriculture -- has worked with and helped to deepen
Chinese reform.
CHINA WTO ACCESSION
The bilateral agreement we reached with China last November thus caps
of thirty years of patient, detailed work. It is a comprehensive
agreement, which covers industrial goods, services, farm products,
unfair trade practices, and all the barriers to American exports;
which will help China create a more open and efficient economy; and
which will help us redress a deeply imbalanced trade relationship.
In manufacturing, China will cut industrial tariffs from an average of
24.6% in 1997 to 9.4% by 2005. China will also eliminate all quotas
and discriminatory taxes. And of critical importance, in virtually all
products it will allow both foreign and Chinese businesses to market,
distribute and service their products; and to import the parts and
products they choose. To choose a few examples: tariffs on information
technology will be eliminated entirely; tariffs on wood products drop
from 10.6% to 3.8%, and to zero if the WTO as a whole agrees to tariff
elimination; auto tariffs will fall from current levels of 80-100% to
25%.
In services, China's markets will open for the full range of
industries: distribution, telecommunications, financial services,
insurance, professional, business and computer services, motion
pictures, environmental services, accounting, law, architecture,
construction, travel and tourism, and other industries. In fields such
as distribution and telecom, China will open to direct foreign
participation for the first time since the 1940s.
In agriculture, on U.S. priority products tariffs drop from an average
of 31% to 14% by 2004. This affects every product from beef, where
tariffs will fall from 45% to 12%; to lobster, where we cut tariffs
from 30% to 15%. China will also expand access for bulk agricultural
products; agree to end import bans, cap and reduce trade-distorting
domestic supports; eliminate export subsidies and base food safety
decisions on science.
And the agreement gives American workers and businesses stronger
protection against unfair trade practices, import surges, and
investment practices intended to draw jobs and technology to China. It
addresses state enterprise policies, forced technology transfer, local
content, offsets and export performance requirements. It provides, for
a 12-year period, a special remedy to discipline market-disrupting
import surges from China. And it strengthens our antidumping laws by
guaranteeing our right to use a special non-market economy methodology
to address dumping for 15 years after China's accession to the WTO.
All these commitments are fully enforceable, through our trade laws,
through WTO dispute settlement, through periodic multilateral review
of China's adherence as well as multilateral pressure from all 135
members of the WTO, through increased monitoring by the U.S., with the
President's request last month for a tripling of funds for China
compliance and enforcement in his Fiscal Year 2001 budget, and of
course through other mechanisms such as the special anti-dumping and
anti-import surge remedies.
Immediately on accession to the WTO, China will begin opening its
market in virtually every sector. The phase-in of further concessions
will be limited to five years in almost all cases, and in many cases
one to three. And the work ahead for China -- bilateral market access
agreements with several other WTO members, most notably the European
Union, and a multilateral negotiation on additional rules - should
strengthen the already very strong accession agreement we negotiated.
PERMANENT NORMAL TRADE RELATIONS
The question now before us is whether we will take advantage of these
commitments.
China will be a WTO member regardless of the outcome of our debate.
There is no doubt of that. Its government has committed itself to a
faster pace of market-opening and economic reform; and to the risks
these entail for an entrenched political system. The only question,
ironically, is whether we will receive the full benefits of their
accession and the historic agreement we negotiated. And that brings me
to the question of permanent Normal Trade Relations status for China,
or NTR.
By contrast to China's historic set of commitments, we make no changes
whatsoever in our market access policies; in a national security
emergency, in fact, we can withdraw market access China now has. We
change none of our laws controlling the export of sensitive
technology. And we amend none of our trade laws.
We have only one obligation: we must grant China permanent NTR or risk
losing the full benefits of the agreement we negotiated, including
broad market access, special import protections, and rights to enforce
China's commitments through WTO dispute settlement. In terms of our
China policy, this is no real change. NTR is simply the tariff status
we give to virtually all our trading partners; which we have given
China since the Carter Administration; and which every Administration
and every Congress over the intervening 20 years has reviewed and
found, even at the periods of greatest strain in our relationship, to
be in our fundamental national interest.
But the legislative grant of permanent NTR is critical. All WTO
members, including ourselves, pledge to give one another permanent NTR
to enjoy the full benefits available in one another's markets. If
Congress were to refuse to grant permanent NTR, our Asian, Latin
American, Canadian and European competitors will reap these benefits
but American farmers and factory workers, as well as service
providers, would be left behind.
WTO ACCESSION AND BROADER ISSUES
That is reason enough for our commitment to secure permanent NTR for
China. But the costs of U.S. retreat at this most critical moment
would go well beyond our export and trade interests.
As I noted earlier, it is not only fair but necessary to judge the WTO
accession in light of its implications for reform in China and Pacific
security; and when we look beyond the precise commitments China has
made to their deeper meaning, we see that these American goals would
be fundamentally threatened by a retreat from this historic agreement.
As even the brief review I have given indicates, China's commitments
go well beyond sharp reductions of trade barriers at the border. China
will:
For the first time since the 1940s, permit foreign and Chinese
businesses to import and export freely from China.
Reduce, and in some cases remove entirely, state control over internal
distribution of goods and the provision of services.
Enable, again for the first time since the 1940s, foreign businesses
to participate in information industries such as telecommunications,
including the Internet.
And subject government decisions in all fields covered by the WTO to
impartial dispute settlement when necessary.
These commitments alter policies dating to the earliest years of the
communist era. They are a remarkable victory for economic reformers in
China, giving China's people more access to information, and weakening
the ability of hardliners to isolate China's public from outside
influences and ideas. Altogether, they reflect a judgment -- still not
universally shared within the Chinese government -- that prosperity,
security and international respect will come not from the static
nationalism, state power and state control China adopted after the
war; but rather economic opening to and engagement with the world, and
ultimately development of the rule of law, inherent in the initiative
President Truman began in 1948.
That is why some of the leading advocates of democracy and human
rights in Hong Kong and China - Bao Tong, jailed for seven years after
Tiananmen Square; Ren Wanding, one of the founders of China's modern
human rights movement; Martin Lee, the leader of Hong Kong's
Democratic Party - see this agreement as China's most important step
toward reform in twenty years.
And internationally, the WTO accession will deepen and speed a process
that has been of enormous importance to Pacific peace and security.
Over thirty years, as China has reformed its economy and opened to the
world, its stake in the region's stability and prosperity has grown.
Economic reform has thus helped move its government away from the
revolutionary foreign policy of the 1950s and 1960s, and towards a
positive and constructive role in maintaining peace on the Korean
Peninsula, in the Asian financial crisis, and on the UN Security
Council.
We should never, of course, imagine that a trade agreement will cure
all our disagreements. When we disagree with China we must act with
candor and firm assertion of our interests and values - as we have
done repeatedly with respect to Taiwan; as we have done in sanctioning
China as a country of special concern under the International
Religious Freedom Act; and as will do next week at the UN Human Rights
Commission, when we push for a resolution critical of China's record
on human rights.
But this is only part of our approach. As Theodore Roosevelt said of
his Open Door Policy to China in the first years of the 20th century:
"We must insist firmly on our rights; and China must beware of
persisting in a course of conduct to which we cannot honorably submit.
But we in our turn must recognize our duties exactly as we insist upon
our rights."
In this spirit, as we insist upon our rights, we also recognize how
important a stable and peaceful relationship with China is -- for the
Chinese, for the world, and for America. And thus we see a fundamental
responsibility to act upon shared interests and mutual benefit. We
have done so in the Asian financial crisis; in the maintenance of
peace on the Korean peninsula; and, for over a quarter century, in
trade.
Each step in our China trade policy since 1972 has rested upon
concrete American interests; promoted reform and an emerging rule of
law within China; and better integrated China in the Pacific economy.
Thus, each has strengthened China's stake in prosperity and stability
throughout Asia. Together with our Pacific alliances and military
commitments, in tandem with our advocacy of human rights, and in the
best tradition of postwar American leadership, trade policy has helped
to strengthen guarantees of peace and security for us and for the
world.
And China's WTO accession, together with permanent NTR, will be the
most significant step in this process for many years.
CONCLUSION
So, if we have the wisdom and the confidence to make the right choice,
we open an extraordinary set of possibilities.
A new and fundamentally improved trade relationship with the world's
largest country, which offers practical, concrete benefits to
communities throughout America, strengthens guarantees of fairness for
our working people and businesses, creates new export opportunities
that mean jobs and growth; and which caps fifty-three years of
patient, difficult and extraordinarily successful work towards a world
of open markets under law.
A decisive step toward deeper and swifter reform within China,
strengthening the rule of law; offering new opportunities and hope for
a better life to hundreds of millions of Chinese; and making China a
country freer, more open to the world, and more responsive to the rule
of law than it is today.
And a relationship with the world's largest nation which may have
moments of tension and volatility, but in which we also act to find
common ground and strengthen hopes for peace.
That is the opportunity before us. These are the stakes. And that is
why the Administration is committed to permanent Normal Trade
Relations status for China on the basis of this historic agreement.
Thank you very much.
(end text)
(Distributed by the Office of International Information Programs, U.S.
Department of State. Web site: usinfo.state.gov)



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